Sierra Bullets Bought By Clarus Corporation

Sierra Bullets of Sedalia, Missouri has been acquired by Clarus Corporation. The announcement was made on Tuesday. This makes the second bullet manufacturer to be owned by a publicly traded company with Speer being the other. According to the release below, Clarus paid $79 million for Sierra. Clarus plan to invest in expanding Sierra’s marketing efforts, distribution, and product development. All the senior leadership of Sierra will remain in place.

Black Diamond climbing equipment is the other major brand owned by Clarus Corporation. If I am not mistaken, Black Diamond was founded by Yvon Chouinard and spun off from Patagonia.

This is an interesting combination. The only synergies that readily come to mind involve the engineering behind metal coatings and cladding.

From the release (in part):

SALT LAKE CITY, Aug. 22, 2017 (GLOBE NEWSWIRE) — Clarus Corporation (CLAR) (“Clarus” or the “Company”), a diversified holding company which seeks opportunities to acquire and grow businesses that can generate attractive shareholder returns, has completed the acquisition of Sierra Bullets, L.L.C. (“Sierra”) for $79 million, subject to a post-closing working capital adjustment. The transaction is expected to be immediately accretive to Clarus’ earnings per share.

Since 1947, Sierra has been dedicated to manufacturing the highest-quality, most accurate bullets in the world. From local and international shooting competitions to sport and hunting, Sierra offers best-in-class accuracy and precision that hunting and sport shooting enthusiasts have come to depend on. This performance is born from a proprietary manufacturing process that enables the achievement of the tightest tolerances in the industry.

Sierra’s products have cultivated a significant consumer following recognized by its iconic “green box” packaging and include globally recognized brands such as Sierra MatchKing, Sierra GameKing, and Sierra BlitzKing…

“The team at Sierra has continued building on a 70-year legacy dedicated to the highest-level of precision in design, world-class manufacturing and quality control,” said Warren B. Kanders, executive chairman of Clarus. “These attributes have cultivated a diverse customer base of enthusiasts and industry OEMs that drive high recurring revenue and strong cash flow, which we expect to maximize through the utilization of our net operating loss carryforwards.”

Clarus expects to leverage its various strategic and financial resources to accelerate Sierra’s growth. This includes investments to enhance marketing and digital capabilities, improve distribution, forge new customer accounts, and develop new products.

Sierra is led by a seasoned senior management team with decades of combined manufacturing and industry expertise that is dedicated to the long-term growth of the brand. All senior management are expected to remain with Sierra under Clarus’ ownership.

Sierra’s President Pat Daly commented: “Our team takes great pride in developing and manufacturing the most precise and accurate bullets in the world. This is supported by our deep institutional knowledge of highly-specialized manufacturing processes that have produced leading products and created a significant competitive advantage. As the only pure-play bullet brand, it was important for us to partner with a team that shares our values and commitment to excellence, and we are excited to join the Clarus family. I look forward to staying on to continue driving our brand growth.”…

Kanders concluded: “We remain committed to seeking to acquire additional companies in industries potentially unrelated to outdoor that satisfy our investment criteria as we found in Sierra. In addition, the minimal leverage incorporated in this transaction and Sierra’s free cash flow dynamics are expected to provide capacity for future acquisitions utilizing our structure.”

Sierra Bullets On The Shutdown Of The Herculaneum MO Lead Smelter

As has been reported in many places, the Doe Run Company will be closing their lead smelting plant in Herculaneum, Missouri. The closure of the only primary lead smelter or a smelting plant that produces lead from lead ore is due to the EPA’s ten-fold increase in air standards for lead.

The NRA-ILA provided a quick summary:

In December, the final primary lead smelter in the United States will close. The lead smelter, located in Herculaneum, Missouri, and owned and operated by the Doe Run Company, has existed in the same location since 1892.

The Herculaneum smelter is currently the only smelter in the United States which can produce lead bullion from raw lead ore that is mined nearby in Missouri’s extensive lead deposits, giving the smelter its “primary” designation. The lead bullion produced in Herculaneum is then sold to lead product producers, including ammunition manufactures for use in conventional ammunition components such as projectiles, projectile cores, and primers. Several “secondary” smelters, where lead is recycled from products such as lead acid batteries or spent ammunition components, still operate in the United States.

Doe Run made significant efforts to reduce lead emissions from the smelter, but in 2008 the federal Environmental Protection Agency issued new National Ambient Air Quality Standards for lead that were 10 times tighter than the previous standard. Given the new lead air quality standard, Doe Run made the decision to close the Herculaneum smelter.

Most ammunition uses lead as one of its primary components whether in bullets or lead shot. The question is whether they use recycled lead or lead that comes directly from ore.

Sierra Bullets of Sedalia, Missouri is the first bullet manufacturer that I know of that has addressed the question of whether the plant closure will shut down their supply of lead. The answer is a qualified no.

The main question asked is “Will this shut down your supply of lead.” The answer to that is no. First, Sierra buys lead from several different vendors to maintain constant supply. Second, this facility only smelts primary lead or lead ore. This is lead ore that has just been brought out of the earth. Sierra uses no primary lead at all and never has, so we use nothing directly from this facility. The lead we buy from Doe Run comes from their recycling facility in Boss, MO that is about 90 miles away from the smelter that is closing.

The facility we buy from is still going strong and delivering to us as scheduled. The lead from this facility is from recycled lead, mostly coming from car batteries. This is a continuing “in and out” cycle for them and the smelter closing will not affect this facility.

Our supply should not be in jeopardy and we do not anticipate any changes in our supply chain at this time. Could the lack of primary lead create a little more demand for recycled lead? Sure, but how much is unknown. Could this increase in demand also create an increase in price? Sure, but again, by how much is unknown at this time.

There are many other primary lead smelters in the world and so the flow of primary lead will not be shut off. Where there is a need for primary lead, I am sure there will be a salesman more than happy to pick up the business.

If you read their answer closely, they are saying their source of lead seems to be secure. However, the demand for recycled lead will undoubtedly begin to rise as battery manufacturers may increase their consumption of recycled lead. The increase in hybrid and electric cars will also increase the demand for lead-acid batteries.

Ammo prices have risen with demand and I expect they will continue to rise from both ammo demand and demand for the raw materials such as lead. Where it will end, I just don’t know.